INSTITUTE FOR EXCELLENCE

IN HIGHER EDUCATION

2022-2023

SUBJECT – TAXATION
TOPIC – TAX DEDUCTED AT SOURCE
CLASS – B.COM 3RD YEAR
ACCOUNTS WITH TAXATION
SECTION ‘D’

SUBMITTED BY – SUBMITTED TO-

VAISHNAVI THAKUR DR. SHARDA GANGWAR

ROLL N0. – 120352

 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my

Professor Dr. Sharda Gangwar as well as our Director Sir Dr.
Pragyyesh Agrawal who gave me the golden opportunity to do
this wonderful project on the topic of taxation ‘Auditing’.
Secondly, I would also like to thank my parents and friends
who helped me a lot in finalizing this project within the
limited time frame.
Lastly, I would like to thank all my supporters who have
motivated me to fulfill my project before the timeline.

Vaishnavi Thakur
120352
 CERTIFICATE

This is to certify that Ms. Vaishnavi Thakur of class B.com

3rd Year Accounts with taxation Section D has completed her
project titled ‘TAX DEDUCTED AT SOURCE’ under the
guidance of Dr. Sharda Gangwar for the academic year 2022-
2023. The certified student has been dedicated throughout
her research and completed her work before the given
deadline without missing any important details from the
project. It is also certified that this project is the individual
work of the student and can be submitted for evaluation.

Name of the Student Name of the Teacher

Vaishnavi Thakur Dr. Sharda Gangwar

120352
 INDEX

S.No Particulars Page No.

1 Introduction
2 Objective of Tax deducted at
source
3 Scheme of Tax Deduction
4 Application for TAN
5 TDS provision under various
sections of 6 Income Tax Act,
1961
6 Procedural compliances,
Preparation and filing 35 of
TDS return
7 Recent Case Laws
 INTRODUCTION

The Indian Income Tax Act provides for scope of the total
income of a person chargeable to tax on an annual basis. The
tax liability is determined as per the provisions of the
Income-tax Act and such tax liability is discharged vide any
of the following mode:

• Advance Tax
• Self-Assessment Tax (SAT)
• Tax Deducted at Source (TDS)
• Tax Collected at Source (TCS)
• Tax on Regular Assessment

Tax Deducted at Source (TDS) is a one of the mode or

mechanism of collecting income tax under the Indian Income
Tax Act of 1961, i.e., ‘the Act’. As per the provision of section
191 of the Act, notwithstanding the regular assessment in
respect of any income take place in a subsequent year called
as assessment year, but in case of certain specified income,
tax is deducted at source by the payer at the prescribed rate
at the time of accrual or payment of such incomes to the
payee. The tax so deducted is required to be deposited with
the government within the specified time limit. The concept
of TDS was introduced with an aim to collect tax from the
very source of income as per which, a person (deductor) who
is liable to make payment of specified nature to any other
person (deductee) shall deduct tax at source and remit the
same into the account of the Central Government. The
deductee from whose income, tax has been deducted at
source would be entitled to get credit of the amount so
deducted on the basis of Form 26AS or TDS certificate
issued by the deductor. Tax deducted at source (TDS) is an
indirect mechanism of collecting tax which combines twin
concepts of “pay as you earn” and “collect as it is being
earned.” Its value lies in the fact that it provides the
Government with a continuous flow of funds and at the same
time eases the burden on the taxpayer.
It is managed by the Central Board for Direct Taxes (CBDT)
and is part of the Department of Revenue managed by Indian
Revenue Service (IRS).
 OBJECTIVES OF TAX
DEDUCTED AT SOURCE

There is various objective of introducing the TDS provision

under the Act. One is also to make sure that tax payment is
not avoided by unscrupulous income tax assesses and the
government receives its actual share of taxes. Therefore, to
achieve this goal, the responsibility of deduction and
deposition of part of the taxes was put on the payer rather
than the receiver of payments of different nature.

The basic objective of introducing tax deducted at source

provision under the Act are as follows:
• Government requires funds throughout the year. The
provision of tax deducted at source help the government to
get funds throughout the year and run the government
smoothly.
• To enable the salaried people to pay the tax as they earn
every month. This helps the salaried persons in paying the
tax in easy instalments and avoids the burden of a lump sum
payment.
• To check that tax payment is not avoided by unscrupulous
income tax assesses.
SCHEME OF TAX DEDUCTION

The obligation to deduct/collect tax at source is upon the

person responsible for paying the income/amount which is
subject to TDS. Therefore, such person i.e., the payer is
required to follow the procedure for deducting/collecting
tax at source mentioned as under:

STEP 1 - The payer has to apply for tax deduction account

number (TAN) in Form No-49B.
STEP 2 - He is to deduct tax from the income/payment
mentioned in the various sections i.e. Section 192 to 196D
STEP 3 - The amount so deducted/collected should be
deposited within the requisite stipulated time to the credit
of central government.
STEP 4 - The payer should prepare TDS Return statements
for every quarter and file the same with the authority
designated by the Income- Tax department (NSDL in this
case) in such form and verified in such manner as may be
prescribed.
STEP 5 - Lastly, the payee should be issued certificate of
tax deduction/collected at source within the specified date.
The TDS certificate to be downloaded from tax portal.
 APPLICATION FOR TAN

TAN Number is a 10 Digit Alphanumeric Number and is used

as an abbreviation for Tax Deduction and Collection Account
Number. Every Assesses liable to deduct TDS is required to
apply for a TAN No. and shall quote this number in all TDS
Returns, TDS Payments and any other communication
regarding TDS with the Income Tax Department.
As per Section 203A of the Income Tax Act 1961, it is
mandatory for all assesses liable to deduct TDS to quote this
TAN Number in all communications regarding TDS with the
Income Tax Department and failure to do so attracts a
penalty.

STEPS FOR MAKING TAN APPLICATION

TAN Number can be applied for online as well as offline. For

making a TAN Application online, a person shall file his
application in Form No. 49B on the following website of
NSDL

STEP 1 - Visit https://tin.tin.nsdl.com/tan/index.html and

select "Online Application for TAN (Form 49B)"
Step 2 - Select Category of Deductors from the drop-
down menu and click on "Select Button";
STEP 3- Fill out the requisite details on the form
STEP 4 - If the data submitted by applicant fails in any
format level validation, a response indicating the error(s)
will be displayed on the screen;
STEP 5 -Forms need to be re-submitted after rectifying
the error(s); In case form level error(s) do not exists a
confirmation screen with data filled by the applicant will be
displayed.
STEP 6 - In case applicant required any amendment to the
data displayed in the confirmation screen, it may choose the
edit option.
STEP 7 - In case the displayed information is correct,
applicant shall choose the confirm option.
STEP 8 - On successful payment of Fees (in case the mode
of payment is other than DD or Cheque) an acknowledgment
slip will be generated
STEP 9 - Applicant shall save and print the acknowledgment
and send it to NSDL along with requisite documents at :
NSDL e-Governance Infrastructure Limited,

5th floor, Mantri Sterling,

Plot No. 341, Survey No. 997/8,
Model Colony,
Near Deep Bungalow Chowk,

Pune – 411016
The envelope should be superscribed as 'APPLICATION FOR
TAN - Acknowledgment Number' (e.g., 'APPLICATION TAN
- 88301020000244').
 TDS PROVISION UNDER
VARIOUS SECTIONS OF
INCOME TAX ACT, 1961

SALARY PAYMENT [SECTION 192]

An employer paying any income chargeable under the head
‘salary’ is responsible for deducting TDS on an average rate
of income tax based on the prevailing tax rate during the
particular Financial Year by considering the estimated
Income of assesses. Accordingly, all employers making such
payments like Individual, HUF, Partnership Firms, Companies,
Co-operative societies, trust, and artificial judicial persons
are liable to deduct TDS.
The following are the pre-requisites for TDS deduction u/s
192 –
• There exists an employer – employee relationship between
deductor and deductee and the payment is in the nature of
salary.
• Any person responsible for making payment to resident /
non-resident employees.
• Payment is made by the employer to the employee.
• The income under the head salaries is above the maximum
amount not chargeable to tax.
The deduction should be made at the time of making payment
and not on when it becomes due or obligation arises. The
employer is required to deduct tax at source on the amount
payable by applying the average rate of income tax. Average
rate of Income tax is calculated on the basis of rates in force
for the particular financial Year in which payment is made.
The rate varies for persons under various slab rate, may vary
in different financial year and depends on total Income
earnings and available deductions per year.

Rate of deduction of tax:

As per Section 192 of the Act, the employer is required to
deduct tax at source on the amount payable at the average
rate of income tax. This has to be computed on the basis of
rates in force for the financial Year in which payment is
made. The Finance Act of each financial year specifies the
rates in force for deduction of tax at source. For F.Y. 2017-
2018 rate of TDS is specified and same is as follows:

I. In case of individual & HUF (other than II and III

below): -

S. Total Income Tax

No
1. Where the total NIL
income does not
exceed Rs. 2,50,000.
2. Where the total 5% of the amount in excess
income exceeds of Rs. 2,50,000.
Rs. 2,50,000 but does
not exceed Rs.
5,00,000.
3. Where the total Rs. 12,500 + 20% of the
income exceeds amount by which total
Rs. 5,00,000 but does income exceeds Rs.
not exceed 5,00,000.
Rs. 10,00,000
4. Where the total Rs. 1,12,500 + 30% of the
income exceeds Rs. amount by which total
10,00,000. income exceeds
Rs10,00,000.

II. In case of every individual resident in India who is of

age of 60 years or more and below 80 years at any time
during the previous year: -

S. Total Income Tax

No.
1. Where the total NIL
income does not
exceed Rs. 3,00,000.
2. Where the total 5% of the amount in excess
income exceeds of Rs.3,00,000
Rs. 3,00,000 but does
not exceed
Rs. 5,00,000.
3. Where the total Rs. 10,000 + 20% of the
income exceeds amount by which total
Rs. 5,00,000 but does income exceeds
not exceed Rs. 5,00,000.
Rs. 10,00,000.
4. Where the total Rs. 1,10,000 + 30% of the
income exceeds amount by which total
Rs. 10,00,000 income exceeds
Rs. 10,00,000.

III. In case of an individual resident who is of the age

of 80 years or more at any time during the previous year:
-

S.No. Total Income Tax

1. Where the total NIL
income does not
exceed Rs. 5,00,000
2. Where the total 20% of the amount by
income exceeds which total income exceeds
Rs. 5,00,000 but does Rs. 5,00,000.
not exceed
Rs. 10,00,000.
3. Where the total Rs. 1,00,000 + 30% of the
income exceeds amount by which total
Rs. 10,00,000. income exceeds
Rs. 10,00,000.
• Surcharge: 10% of income tax, where total income exceeds
Rs.50 lakh up to Rs.1 crore.
• Surcharge: 15% of income tax, where the total income
exceeds Rs.1 crore.
• Cess: 3% on total of income tax + surcharge.
• Please also note that there is also a tax rebate of up to
Rs.2,500 for a taxable income up to Rs. 3.5 lakhs.

TDS on simultaneous employment with more than one

employer or on change of employment:
In cases wherein, during the financial year, an assesses is
employed simultaneously under more than one employer, or
where he has held successively employment under more than
one employer, he may furnish to the person responsible for
making the payment (being one of the said employers as the
assesses may, having regard to the circumstances of his
case, choose), details of the income under the head
“Salaries” due or received by him from the other employer
or employers, the tax deducted at source therefrom and
thereupon the person responsible for making the payment
referred to above shall take into account the details so
furnished for the purposes of making the deduction. The
person responsible for making the payment chargeable
under the head salary shall, for the purposes of estimating
income of the assesses or computing tax deductible, obtain
from the assesses the evidence or proof or particulars of
prescribed claims (including claim for set-off of loss) under
the provisions of the Act in such form and manner as
prescribed in this regard.

Payment of tax by employer on non-monetary perquisite:

Sections 192 (1A) and 192 (1B) of the Act, enable the
employer at his option, to make payment of the entire tax or
a part of the tax due on non-monetary perquisites given to
the employee. The tax payable is to be determined at the
average rate of the income tax computed on the basis of
rates in force and the payment will have to be made when
such tax was otherwise deductible, i.e., at the time of
payment of income chargeable under the head salaries, to
the employee. Further, the tax so paid shall be deemed to
be the TDS made from the salary of the employee.
However, as per proviso to section 198, tax so paid will not
be deemed to be income of the employee.

TDS where the salary paid is net of tax:

Where the employee enters into an agreement or an
arrangement as per which the tax chargeable on the income
is borne by the employer then for the purpose of deduction
of tax, the income is to be increased to such an amount as
would, after deduction of tax thereon be equal to the net
amount payable as per the agreement or arrangement
(Section 195A). However, this provision is not applicable
where the employer has made payment of tax on non-
monetary perquisites as provided in section 192(1A).
Salary paid in Foreign Currency [Rule 26 & 115]:
For the purpose of deduction of tax at source on any income
payable in foreign currency, the rate of exchange for the
calculation of the value in rupees of such income payable to
an assesses outside India shall be the telegraphic transfer
buying rate of such currency as on the date on which the
tax is required to be deducted at source under the
provisions of Chapter XVIIB by the person responsible for
paying such income. It may be noted that this rule is
applicable only for determination of TDS. However, in
computing the salary income, the rate of conversion to be
applied is the telegraphic transfer buying rate on the last
day of month immediately preceding the month in which the
salary is due or is paid in advance or arrears (Rule 115).
“Telegraphic transfer buying rate (TTBR)”, means the
rate or rates of exchange adopted by the State Bank of
India.

Issue of Form 16 & Form 12 BA:

The TDS deducted to be deposited to Government and a
FORM 16 should be issued to employees. The employees
claim the TDS amount while submitting tax return against
the total tax payable. The cut-off date for issuing Form 16
is 31 May of the Next Financial year in which tax is
deducted. The due date of issue Form 16 for the financial
year 2016-17 is extended to 15 June 2017 vide Notification
dated 2 June 2017. Apart from issue of form 16 Form, Form
12BA is also issued that contains details of perquisites &
Profit lieu of salary chargeable under section 17(3) of the
Act. With effect from 1 June 2016, as per Rule 26C, an
employee shall furnish to employer evidence or particulars
of the claims made in Form No.12BB for purpose of
estimation of his income and TDS.

PAYMENT OF ACCUMULATED BALANCE DUE TO AN

EMPLOYEE [SECTION 192A]
The provision of section 192A of the Act override the any
other provisions of the Act. The trustees of the Employees’
Provident Fund Scheme, 1952, framed under section 5 of
the Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952 (19 of 1952) or any person authorised under the
scheme to make payment of accumulated balance due to
employees, shall, in a case where the accumulated balance
due to an employee participating in a recognised provident
fund is includible in his total income owing to the provisions
of rule 8 of Part A of the Fourth Schedule not being
applicable, at the time of payment of the accumulated
balance due to the employee, deduct income-tax thereon at
the rate of 10%. If PAN of recipient is not available, tax
will be deductible at maximum marginal rate of tax.
Exception: The deduction shall not be made where the
amount of such payment is less than Rs.50,000.
INTEREST ON SECURITIES [SECTION 193]

The person responsible for paying to a resident any income

by way of interest on securities shall, at the time of credit
of such income to the account of the payee or at the time
of payment thereof in cash or by issue of a cheque or draft
or by any other mode, whichever is earlier, deduct income-
tax at the rates in force on the amount of the interest
payable.

Exception:

The deduction shall not be made in the following cases:

(i) any interest payable on 4¼ per cent National Defence
Bonds, 1972, where the bonds are held by an individual, not
being a non-resident; or
(ia) any interest payable to an individual on 4¼ per cent
National Defence Loan, 1968, or 4¾ per cent National
Defence Loan, 1972; or
(ib) any interest payable on National Development Bonds; or
(iia) any interest payable on 7-Year National Savings
Certificates; or
(iib) any interest payable on debentures issued by any
institution or authority, or any public sector company, or
any co-operative society (including a cooperative land
mortgage bank or a co-operative land development bank), as
the Central Government may, by notification in the Official
Gazette specify;
(iii) any interest payable on 6½ per cent Gold Bonds, 1977,
or 7 per cent Gold Bonds, 1980, where the Bonds are held
by an individual not being a nonresident, and the holder
thereof makes a declaration in writing before the person
responsible for paying the interest that the total nominal
value of the 6½ per cent Gold Bonds, 1977, or, as the case
may be, the 7 per cent Gold Bonds, 1980, held by him
(including such bonds, if any, held on his behalf by any other
person) did not in either case exceed Rs. 10,000 at any time
during the period to which the interest relates;
(iv) any interest payable on any security of the Central
Government or a State Government: However, this clause
shall not apply to the interest exceeding Rs. 10,000
payables on 8% Savings (Taxable) Bonds, 2003 during the
financial year;
(v) any interest payable to a resident individual or a Hindu
undivided family, on any debenture issued by a company in
which the public are substantially interested, if (
a) the aggregate amount of such interest paid or likely to be
paid on such debenture during the financial year by the
company to resident individual or Hindu undivided family
does not exceed Rs. 5,000; and
(b) such interest is paid by the company by an account
payee cheque;
(vi) any interest payable to the Life Insurance Corporation
of India in respect of any securities owned by it or in which
it has full beneficial interest; or
(vii) any interest payable to the General Insurance
Corporation of India or to any of the four companies formed
by virtue of the schemes of the General Insurance Business
(Nationalisation) Act, 1972 (57 of 1972), in respect of any
securities owned by the Corporation or such company or in
which the Corporation or such company has full beneficial
interest; or
(viii) any interest payable to any other insurer in respect of
any securities owned by it or in which it has full beneficial
interest;
(ix) any interest payable on any security which is in
dematerialized form and listed in a recognized stock
exchange.

DIVIDENDS [SECTION 194]

The principal officer of an Indian company or a company
which has made the prescribed arrangements for the
declaration and payment of dividends (including dividends on
preference shares) within India, shall, before making any
payment in cash or before issuing any cheque or warrant in
respect of any dividend or before making any distribution or
payment to a shareholder, who is resident in India, of any
dividend within the meaning of sub-clause (a) or sub-clause
(b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of
clause (22) of section 2, deduct from the amount of such
dividend, income-tax at the rates in force.
Exception: The deduction shall not be made in the case of a
shareholder, being an individual, if
a) the dividend is paid by the company by an account payee
cheque; and
b) the aggregate of the amounts of such dividend
distributed or paid or likely to be distributed or paid during
the financial year by the company to the shareholder, does
not exceed Rs. 2,500.
The provisions of this section shall not apply to such income
credited or paid to
(a) the Life Insurance Corporation of India in respect of
any shares owned by it or in which it has full beneficial
interest;
(b) the General Insurance Corporation of India or to any of
the four companies formed by virtue of the schemes
framed under sub-section (1) of section 16 of the General
Insurance Business (Nationalisation) Act, 1972 in respect of
any shares owned by the Corporation or such company or in
which the Corporation or such company has full beneficial
interest;
(c) any other insurer in respect of any shares owned by it or
in which it has full beneficial interest.
Exception: The deduction shall not be made in respect of
any dividends referred to in section 115-O.
INTEREST OTHER THAN INTEREST ON SECURITIES
[SECTION 194A]
Any person, not being an individual or a Hindu undivided
family not covered under section 44AB (during the financial
year immediately preceding the financial year in which such
interest is credited or paid) who is responsible for paying to
a resident any income by way of interest other than income
by way of interest on securities, shall, at the time of credit
of such income to the account of the payee or at the time
of payment thereof in cash or by issue of a cheque or draft
or by any other mode, whichever is earlier, deduct income-
tax thereon at the rates in force.
Exception: The deduction shall not be made in the following
cases:
i. where the aggregate of the amounts of such income
credited or paid or likely to be credited or paid during the
financial year by the person does not exceed

a) Rs. 10,000 where the payer is a banking company.

b) Rs. 10,000 where the payer is a co-operative society
engaged in carrying on the business of banking.
c) Rs. 10,000 on any deposit with post office.

d) Rs. 5,000 in any other case.

ii. Income credited or paid to
a) time deposits with a banking company to which the
Banking Regulation Act, 1949 (10 of 1949) applies (including
any bank or banking institution referred to in section 51 of
that Act); or
b) time deposits with a co-operative society engaged in
carrying on the business of banking;
c) deposits with a public company which is formed and
registered in India with the main object of carrying on the
business of providing long-term finance for construction or
purchase of houses in India for residential purposes and
which is eligible for deduction under clause (viii) of sub-
section (1) of section 36.
the aforesaid amount shall be computed with reference to
the income credited or paid by a branch of the banking
company or the co-operative society or the public company,
as the case may be.
iii. Income credited or paid to
a) any banking company or any co-operative society engaged
in carrying on the business of banking (including a co-
operative land mortgage bank), or
b) any financial corporation established by or under a
Central, State or Provincial Act, or
c) the Life Insurance Corporation of India
d) the Unit Trust of India
e) any company or co-operative society carrying on the
business of insurance, or
f) such other institution, association or body or class of
institutions, associations or bodies which the Central
Government notify in this behalf in the Official Gazette;

WINNINGS FROM LOTTERY OR CROSSWORD PUZZLE

[SECTION 194B]

The person responsible for paying to any person any income

by way of winnings from any lottery or crossword puzzle or
card game and other game of any sort in an amount exceeding
Rs. 10,000 shall, at the time of payment thereof, deduct
income-tax thereon at the rates in force.
Provided that in a case where the winnings are wholly in kind
or partly in cash and partly in kind but the part in cash is not
sufficient to meet the liability of deduction of tax in respect
of whole of the winnings, the person responsible for paying
shall, before releasing the winnings, ensure that tax has been
paid in respect of the winnings.

WINNINGS FROM HORSE RACE [SECTION 194BB]

Any person, being a bookmaker or a person to whom a licence
has been granted by the Government under any law for the
time being in force for horse racing in any race course or for
arranging for wagering or betting in any race course, who is
responsible for paying to any person any income by way of
winnings from any horse race in an amount exceeding Rs.
10,000 shall, at the time of payment thereof, deduct income-
tax thereon at the rates in force.

INSURANCE COMMISSION [SECTION 194D]

Any person responsible for paying to a resident any income
by way of remuneration or reward, whether by way of
commission or otherwise, for soliciting or procuring insurance
business (including business relating to the continuance,
renewal or revival of policies of insurance) shall, at the time
of credit of such income to the account of the payee or at
the time of payment thereof in cash or by issue of a cheque
or draft or by any other mode, whichever is earlier, deduct
income-tax thereon at the rates in force.
Exception: The deduction shall not be made if any such
income credited or paid before the 1st day of June, 1973 or
the aggregate of the amounts of such income credited or paid
or likely to be credited or paid during the financial does not
exceed Rs. 15,000.

PAYMENT IN RESPECT OF LIFE INSURANCE POLICY

[SECTION 194DA]
Any person responsible for paying to a resident any sum
under a life insurance policy, including the sum allocated by
way of bonus on such policy, other than the amount not
includible in the total income under clause (10D) of section
10, shall, at the time of payment thereof, deduct income-tax
thereon at the rate of 1%.
Exception: No deduction shall be made where the aggregate
amount of such payments to the payee during the financial
year is less than Rs. 1,00,000.

COMMISSION OR BROKERAGE [SECTION 194H]

Any person, not being an individual or a Hindu undivided
family not covered under section 44AB liable for audit, who
is responsible for paying, on or after the 1st day of June,
2001, to a resident, any income by way of commission (not
being insurance commission referred to in section 194D) or
brokerage, shall, at the time of credit of such income to the
account of the payee or at the time of payment of such
income in cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income-tax thereon
at the rate of 5%.
Exception: No deduction shall be made where the aggregate
amount of such payments to the payee does not exceed Rs.
15,000.

PAYMENTS IN RESPECT OF DEPOSITS UNDER

NATIONAL SAVINGS SCHEME, ETC [SECTION 194EE]
The person responsible for paying to any person any amount
referred to in section 80CCA(a)(2) shall, at the time of
payment thereof, deduct income-tax thereon at the rate of
10%. Exception: No deduction shall be made where the
aggregate amount of such payments to the payee during the
financial year is less than Rs. 2,500.

PAYMENTS ON ACCOUNT OF REPURCHASE OF UNITS

BY MUTUAL FUND OR UNIT TRUST OF INDIA
[SECTION 194F]
The person responsible for paying to any person any amount
referred to in subsection (2) of section 80CCB, relating to
re-purchase of units by mutual funds or units trust of India,
shall at the time of payment thereof, deduct income-tax
thereon at the rate of 20%.

COMMISSION ON THE SALE OF LOTTERY TICKETS

[SECTION 194G]
Any person who is responsible for paying, on or after the 1st
day of October, 1991 to any person, who is engaged in
stocking, distributing, purchasing or selling lottery tickets,
any income by way of commission, remuneration or prize on
such tickets in an amount exceeding Rs. 15,000 shall, at the
time of credit of such income to the account of the payee or
at the time of payment of such income in cash or by the issue
of a cheque or draft or by any other mode, whichever is
earlier, deduct income-tax thereon at the rate of 5%.
COMMISSION OR BROKERAGE [SECTION 194H]
Any person, not being an individual or a Hindu undivided
family not covered under section 44AB liable for audit, who
is responsible for paying, on or after the 1st day of June,
2001, to a resident, any income by way of commission (not
being insurance commission referred to in section 194D) or
brokerage, shall, at the time of credit of such income to the
account of the payee or at the time of payment of such
income in cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income-tax thereon
at the rate of 5%.
Exception: No deduction shall be made where the aggregate
amount of such payments to the payee does not exceed Rs.
15,000

PAYMENT AS RENT [SECTION 194 I]

Any person, not being an individual or a Hindu undivided
family not covered under section 44AB liable for audit, who
is responsible for paying to a resident any income by way of
rent, shall, at the time of credit of such income to the
account of the payee or at the time of payment thereof in
cash or by the issue of a cheque or draft or by any other
mode, whichever is earlier, deduct income-tax thereon at the
rate of i. 2% for the use of any machinery or plant or
equipment; and ii. 10% for the use of any land or building
(including factory building) or land appurtenant to a building
(including factory building) or furniture or fittings;
Exception: No deduction shall be made in the following cases:
i. where the aggregate amount of such payments to the payee
does not exceed Rs. 1,80,000.
ii. payment by way of rent is credited to business trust, being
a real investment trust in respect of any real estate referred
to in clause 23FCA of section 10, owned directly by such
business trust.

PAYMENT ON TRANSFER OF CERTAIN IMMOVABLE

PROPERTY OTHER THAN AGRICULTURAL LAND
[SECTION 194IA]
Any person, being a transferee, responsible for paying (other
than the person referred to in section 194LA) to a resident
transferor any sum by way of consideration for transfer of
any immovable property (other than agricultural land), shall,
at the time of credit of such sum to the account of the
transferor or at the time of payment of such sum in cash or
by issue of a cheque or draft or by any other mode, whichever
is earlier, deduct an amount equal to 1% of such sum as
income-tax thereon.
Exception: No deduction under sub-section (1) shall be made
where the consideration for the transfer of an immovable
property is less than Rs. 50 lakhs rupees.
Note: The provisions of section 203A relating to quoting of
TAN No. shall not apply to a person required to deduct tax in
accordance with the provisions of this section.
PAYMENT OF RENT BY CERTAIN INDIVIDUALS OR
HINDU UNDIVIDED FAMILY [SECTION 194IB]
With effect from 1.6.2017, Any person, being an individual or
a Hindu undivided family (not covered under section 44AB
liable for audit), responsible for paying to a resident any
income by way of rent exceeding Rs. 50,000 for a month or
part of a month during the previous year, shall deduct an
amount equal to 5% of such income as income-tax thereon.
The income-tax referred above shall be deducted on such
income at the time of credit of rent, for the last month of
the previous year or the last month of tenancy, if the
property is vacated during the year, as the case may be, to
the account of the payee or at the time of payment thereof
in cash or by issue of a cheque or draft or by any other mode,
whichever is earlier. The provisions of section 203A relating
to quoting of TAN No. shall not apply to a person required to
deduct tax in accordance with the provisions of this section.
In case, the tax is required to be deducted as per the
provisions of section 206AA, such deduction shall not exceed
the amount of rent payable for the last month of the previous
year or the last month of the tenancy, as the case may be.

PAYMENT UNDER SPECIFIED AGREEMENT [SECTION

194IC]
Notwithstanding anything contained in section 194-IA, any
person responsible for paying to a resident any sum by way
of consideration, not being consideration in kind, under the
agreement referred to in sub-section (5A) of section 45,
shall at the time of credit of such sum to the account of the
payee or at the time of payment thereof in cash or by issue
of a cheque or draft or by any other mode, whichever is
earlier, deduct an amount equal to 10% of such sum as
income-tax thereon.

PAYMENT OF COMPENSATION ON ACQUISITION OF

CERTAIN IMMOVABLE PROPERTY [SECTION 194LA]
Any person responsible for paying to a resident any sum,
being in the nature of compensation or the enhanced
compensation or the consideration or the enhanced
consideration on account of compulsory acquisition, under any
law for the time being in force, of any immovable property
(other than agricultural land), shall, at the time of payment
of such sum in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier, deduct an amount equal to
10% of such sum as income-tax thereon. Exemption: No TDS
deduction shall be made in the following cases: i. where the
aggregate amount of such payments to a resident during the
financial year does not exceed Rs. 2,50,000. ii. where such
payment is made in respect of any award or agreement which
has been exempted from levy of income-tax under section 96
of the Right to Fair Compensation and Transparency in Land
Acquisition, Rehabilitation and Resettlement Act, 2013.
INCOME BY WAY OF INTEREST FROM
INFRASTRUCTURE DEBT FUND [SECTION 194LB]
Where any income by way of interest is payable to a non-
resident, not being a company, or to a foreign company, by an
infrastructure debt fund referred to in clause (47) of
section 10, the person responsible for making the payment
shall, at the time of credit of such income to the account of
the payee or at the time of payment thereof in cash or by
issue of a cheque or draft or by any other mode, whichever
is earlier, deduct income-tax thereon at the rate of 5%.

CERTAIN INCOME FROM UNITS OF A BUSINESS

TRUST [SECTION 194LBA]
Where any distributed income referred to in section 115UA,
being of the nature referred to in [sub-clause (a) of] clause
(23FC) [or clause (23FCA)] of section 10, is payable by a
business trust to its unit holder being a resident, the person
responsible for making the payment shall at the time of
credit of such payment to the account of the payee or at the
time of payment thereof in cash or by the issue of a cheque
or draft or by any other mode, whichever is earlier, deduct
incometax thereon at the rate of 10%. Where any
distributed income referred to in section 115UA, being of the
nature referred to in [sub-clause (a) of] clause (23FC) of
section 10, is payable by a business trust to its unit holder,
72[being a non-resident (not being a company)] or a foreign
company, the person responsible for making the payment
shall at the time of credit of such payment to the account of
the payee or at the time of payment thereof in cash or by
the issue of a cheque or draft or by any other mode,
whichever is earlier, deduct income-tax thereon at the rate
of 5%. Where any distributed income referred to in section
115UA, being of the nature referred to in clause (23FCA) of
section 10, is payable by a business trust to its unit holder,
being a non-resident (not being a company), or a foreign
company, the person responsible for making the payment
shall at the time of credit of such payment to the account of
the payee or at the time of payment thereof in cash or by
the issue of a cheque or draft or by any other mode,
whichever is earlier, deduct income-tax thereon at the rates
in force.

INCOME IN RESPECT OF UNITS OF INVESTMENT

FUND [SECTION 194LBB]
Where any income, other than that proportion of income
which is of the nature as income referred to in clause
(23FBB) of section 10, is payable to a unit holder in respect
of units of an investment fund, the person responsible for
making the payment shall, at the time of credit of such
income to the account of payee or at the time of payment
thereof in cash or by issue of a cheque or draft or by any
other mode, whichever is earlier deduct income-tax thereon
as follows:
 at the rate of 10%, where the payee is a resident;
 ii. at the rates in force, where the payee is a non-
resident (not being a company) or a foreign company.
Note: Where the payee is a non-resident (not being a
company) or a foreign company, no deduction shall be
made in respect of any income that is not chargeable to
tax under the provisions of the Act.

INCOME IN RESPECT OF INVESTMENT IN

SECURITIZATION TRUST [SECTION 194LBC]
Where any income is payable to an investor, being a resident,
in respect of an investment in a securitisation trust
specified in clause (d) of the Explanation occurring after
section 115TCA, the person responsible for making the
payment shall, at the time of credit of such income to the
account of the payee or at the time of payment thereof in
cash or by issue of a cheque or draft or by any other mode,
whichever is earlier, deduct income-tax thereon, at the rate
of: i. 25%, if the payee is an individual or a Hindu undivided
family; ii. 30%, if the payee is any other person.

INCOME BY WAY OF INTEREST ON CERTAIN BONDS

AND GOVERNMENT SECURITIES [SECTION 194LD]
Any person who is responsible for paying to a person being a
Foreign Institutional Investor or a Qualified Foreign
Investor, any income by way of interest referred to in sub-
section (2), shall, at the time of credit of such income to the
account of the payee or at the time of payment of such
income in cash or by the issue of a cheque or draft or by any
other mode, whichever is earlier, deduct income-tax thereon
at the rate of 5%. The income by way of interest referred
above shall be the interest payable on or after the 1st day
of June, 2013 but before the 83[1st day of July, 2017 in
respect of investment made by the payee in:
 a rupee denominated bond of an Indian company; or
 a Government security: Provided that the rate of
interest in respect of bond referred to in clause (i)
shall not exceed the rate as may be notified by the
Central Government in this behalf.

INCOME PAYABLE “NET OF TAX” [SECTION 195A]

In a case other than that referred to in sub-section (1A) of
section 192, where under an agreement or other
arrangement, the tax chargeable on any income referred to
in the foregoing provisions of this Chapter is to be borne by
the person by whom the income is payable, then, for the
purposes of deduction of tax under those provisions such
income shall be increased to such amount as would, after
deduction of tax thereon at the rates in force for the
financial year in which such income is payable, be equal to
the net amount payable under such agreement or
arrangement.
INTEREST OR DIVIDEND OR OTHER SUMS PAYABLE
TO GOVERNMENT, RESERVE BANK OR CERTAIN
CORPORATIONS [SECTION 196]
Notwithstanding anything contained in the foregoing
provisions of this Chapter, no deduction of tax shall be
made by any person from any sums payable to: i. the
Government, or ii. the Reserve Bank of India, or iii. a
corporation established by or under a Central Act which is,
under any law for the time being in force, exempt from
income-tax on its income, or iv. a Mutual Fund specified
under clause (23D) of section 10, where such sum is payable
to it by way of interest or dividend in respect of any
securities or shares owned by it or in which it has full
beneficial interest, or any other income accruing or arising
to it.

CERTIFICATE FOR DEDUCTION AT LOWER RATE

[SECTION 197]
Where, in the case of any income of any person or sum
payable to any person, income-tax is required to be
deducted at the time of credit or, as the case may be, at
the time of payment at the rates in force under the
provisions of sections 192, 193, 194, 194A, 194C, 194D,
194G, 194H, 194-I, 194J, 194K , 194LA , 194LBB, 194LBC
and 195, the Assessing Officer is satisfied that the total
income of the recipient justifies the deduction of income-
tax at any lower rates or no deduction of income-tax, as the
case may be, the Assessing Officer shall, on an application
made by the assessee in this behalf, give to him such
certificate as may be appropriate. Where any such
certificate is given, the person responsible for paying the
income shall, until such certificate is cancelled by the
Assessing Officer, deduct incometax at the rates specified
in such certificate or deduct no tax, as the case may be.

NO DEDUCTION TO BE MADE IN CERTAIN CASES

[SECTION 197A]
Notwithstanding anything contained in section 194 or
section 194EE, no deduction of tax shall be made under any
of the said sections in the case of an individual, who is
resident in India, if such individual furnishes to the person
responsible for paying any income of the nature referred to
in section 194 or, as the case may be, section 194EE, a
declaration in writing in duplicate in the prescribed form
and verified in the prescribed manner to the effect that
the tax on his estimated total income of the previous year
in which such income is to be included in computing his total
income will be nil. [Section 197A (1)] Notwithstanding
anything contained in section 192A or section 193 or section
194A or section 194D or section 194DA or section 194I or
section 194K, no deduction of tax shall be made under any
of the said sections in the case of a person (not being a
company or a firm), if such person furnishes to the person
responsible for paying any income of the nature referred to
in section 192A or section 193 or section 194A or section
194D or section 194DA or section 194I or section 194K, as
the case may be, a declaration in writing in duplicate in the
prescribed form and verified in the prescribed manner to
the effect that the tax on his estimated total income of
the previous year in which such income is to be included in
computing his total income will be nil. [Section 197A (1A)]
The provisions of this section shall not apply where the
amount of any income of the nature referred to in sub-
section (1) or sub-section (1A), as the case may be, or the
aggregate of the amounts of such incomes credited or paid
or likely to be credited or paid during the previous year in
which such income is to be included exceeds the maximum
amount which is not chargeable to income-tax. [Section
197A (1B)] Notwithstanding anything contained in section
192A or section 193 or section 194 or section 194A or
section 194D or section 194DA or section 194EE or or
section 194I or section 194K or sub-section (1B) of this
section, no deduction of tax shall be made in the case of an
individual resident in India, who is of the age of sixty years
or more at any time during the previous year , if such
individual furnishes to the person responsible for paying any
income of the nature referred to in section 192A or section
193 or section 194 or section 194A or section 194D or
section 194DA or section 194EE or section 194K, as the case
may be, a declaration in writing in duplicate in the
prescribed form and verified in the prescribed manner to
the effect that the tax on his estimated total income of
the previous year in which such income is to be included in
computing his total income will be nil. [Section 197A (1C)]
Notwithstanding anything contained in this section, no
deduction of tax shall be made by the Offshore Banking
Unit from the interest paid:
 on deposit made on or after the 1st day of April, 2005,
by a non-resident or a person not ordinarily resident in
India; or
 on borrowing, on or after the 1st day of April, 2005,
from a non-resident or a person not ordinarily resident
in India.

CREDIT FOR TAX DEDUCTED [SECTION 199]

Any deduction made in accordance with the foregoing
provisions of this Chapter and paid to the Central
Government shall be treated as a payment of tax on behalf
of the person from whose income the deduction was made,
or of the owner of the security, or of the depositor or of
the owner of property or of the unitholder, or of the
shareholder, as the case may be. The Board for the
purposes of giving credit in respect of tax deducted or tax
paid in terms of the provisions of this Chapter, make rules
37BA.
CREDIT FOR TAX DEDUCTED AT SOURCE FOR THE
PURPOSES OF SECTION 199 [RULE 37BA]
Credit for tax deducted at source and paid to the Central
Government in accordance with the provisions of Chapter
XVII, shall be given to the person to whom payment has been
made or credit has been given (hereinafter referred to as
deductee) on the basis of information relating to deduction
of tax furnished by the deductor to the income-tax authority
or the person authorised by such authority.
Where under any provisions of the Act, the whole or any part
of the income on which tax has been deducted at source is
assessable in the hands of a person other than the deductee,
credit for the whole or any part of the tax deducted at
source, as the case may be, shall be given to the other person
and not to the deductee provided that the deductee files a
declaration with the deductor and the deductor reports the
tax deduction in the name of the other person in the
information relating to deduction of tax referred to in sub-
rule (1).
The declaration filed by the deductee shall contain the name,
address, permanent account number of the person to whom
credit is to be given, payment or credit in relation to which
credit is to be given and reasons for giving credit to such
person.
The deductor shall issue the certificate for deduction of tax
at source in the name of the person in whose name credit is
shown in the information relating to deduction of tax
referred to in sub-rule (1) and shall keep the declaration in
his safe custody.
Credit for tax deducted at source and paid to the Central
Government, shall be given for the assessment year for which
such income is assessable. Where tax has been deducted at
source and paid to the Central Government and the income is
assessable over a number of years, credit for tax deducted
at source shall be allowed across those years in the same
proportion in which the income is assessable to tax.
Credit for tax deducted at source and paid to the account of
the Central Government shall be granted on the basis of:
 the information relating to deduction of tax
furnished by the deductor to the income-tax
authority or the person authorised by such
authority; and
 (ii) the information in the return of income in
respect of the claim for the credit, subject to
verification in accordance with the risk
management strategy formulated by the Board
from time to time.
PROCEDURAL COMPLIANCES,
PREPARATION AND FILING OF
TDS RETURN

An optional scheme of electronic payment of taxes for

income tax was introduced in 2004. However, with a view to
expand the scope of electronic payment of taxes, the
scheme of electronic payment of taxes has been made
mandatory for the following categories of tax-payers:
i. All corporate assesses;
ii. All assesses (other than company) to whom
provisions of section 44AB of the Income Tax Act
are applicable.
TIME LIMIT FOR THE PAYMENT OF TDS TO THE
GOVERNMENT

S. Month Non-Govt. Government Deductors

No
1. April to 7th of the next • Same day in cases
February month in which TDS deposited without
TDS deducted. challan no. ITNS 281
• 7th of the next
month in which TDS is
deducted in cases TDS
deposited with challan
2. March 30th April of • Same day in cases
next financial TDS deposited without
year challan no. ITNS 281
• 7th of the next
month in which TDS is
deducted in cases TDS
deposited with challan.

Note: Any sum deducted u/s 194IA shall be paid to the

credit of the central government within a period of 30 days
(w.e.f. 01.06.2016) from the end of the month in which the
deduction is made and shall be accompanied by a challan cum-
statement in Form No. 26QB.
The Due date to submit Form 24G extended from 10 days of
the end of the relevant month to
– 30th day of April where the statement relates to the
month of March and
– 15 days from the end of relevant month It is furnished
electronically under digital signature or electronically along
with the verification of the statement.

ISSUE OF TDS CERTIFICATE

Every person deducting tax at source is required as per

Section 203 to furnish a certificate to the payee to the
effect that tax has been deducted along with certain other
particulars. This certificate is usually called the TDS
certificate. Even the banks deducting tax at the time of
payment of pension are required to issue such certificates.
In case of employees receiving salary income including
pension, the certificate has to be issued in Form No.16. In all
other cases, the TDS certificate is to be issued in Form 16B.
The certificate is to be issued in the diductor’s own
stationery. However, there is no obligation to issue TDS
certificate in case of tax at source is not deducted
/deductible by virtue of claims of exemptions/ deductions.
DUE DATE FOR ISSUE OF CERTIFICATE
FORM 16: 31 May of the Next Financial year in which tax is
deducted. For issue of Form 16 for the financial year 2016-
17, as per Notification, the due date is extended to 15 June
2017.
FORM 16A: Within 15 days from due date for furnishing the
statement of tax deducted under rule 31A

Quarter ended Due date of Form 16A

30th June 15th August
30th September 15th November
31st December 15th February
31st March 15th June

Form 16B: Within 15 days from due date for furnishing the
challan cum statement in Form 26QB.

ISSUE OF DUPLICATE CERTIFICATE

Where the original TDS certificate is lost, the deductee can
approach the deductor for issue of a duplicate TDS
certificate. The deductor may issue a duplicate certificate in
Form No. 16 or Form 16A as the case may be. However, such
a certificate has to be certified as duplicate by the
deductor. Further, the deductor may, at his option, use
digital signatures to authenticate such certificates. In case
of issue of such certificates the deductor shall ensure that
a) The provisions of sub-rule (2) of Rule 31 regarding
specification of TAN, PAN of deducteee book identification
number; Challan identification number; receipt number of
relevant quarterly statements etc. are complied with;
b) Once the certificate is digitally signed, the contents of
the certificates are not amendable to change; and
c) The certificates have a control number and a log of such
certificates is maintained by the deductor.

TDS FORMS
Any person deducting any sum in accordance with the
foregoing provisions of this Chapter shall pay within the
prescribed time, the sum so deducted to the credit of the
Central Government or as the Board directs. Further,
quarterly TDS Return is required to be filed by the assesses
who has deducted the TDS. TDS Returns include fields like
TAN No., TDS Payment, amount deducted, type of payment,
PAN No. etc
Form 24Q - Statement for tax deducted at source from
salaries.
Form 26Q - Statement for tax deducted at source on all
payments except salaries.
Form 27Q -Statement for deduction of tax from interest,
dividend, or any other sum payable to non-residents.
Form 27EQ - Statement of collection of tax at source.
Form 26QB - For section 194IA separate return is not
required, challan cum return to be filed on Form 26QB to be
deposited within a period of 30 days (w.e.f. 01.06.2016)
from the end of the month in which the deduction is made.

The quarterly return statements should be accompanied by a

signed verification in Form No. 27A. Form 27A is a control
chart of quarterly TDS statements to be filed by
deductor/collectors along with quarterly statements. It is a
summary of TDS returns which contains control totals of
‘amount paid’ and ‘income tax deducted at source’.

TDS RETURN DUE DATE

A return of TDS is a comprehensive statement containing
details of payment made and taxes deducted thereon along
with other prescribed details. As per section 200(3) of the
Act, the Due Date for filing TDS Return (both online as well
as physical w.e.f. 01.06.2016) is as follows:

Quarter Due Date for Form 27Q Form 27EQ

Form 24Q &
April to June 31st July 31st July 15th July
July to Sept 31st Oct 31st Oct 15th Oct
Oct to Dec 31st Jan 31st Jan 15th Jan
Jan to March 31st May 31st May 15th May
 REFUND OF TDS

In case of excess deduction of tax at source, claim of refund

of such excess TDS can be made by the deductor. The excess
amount is refundable as per procedure laid down for refund
of TDS vide Circular No.2/2011 dt. 27.4.11 (which supersedes
the earlier circular no.285 dt 21.10.1980 on this subject).
The difference between the actual payment made by the
deductor and the tax deductible at source, will be treated as
the excess payment made.
In case such excess payment is discovered by the deductor
during the financial year concerned, the present system
permits credit of the excess payment in the quarterly
statement of TDS of the next quarter during the financial
year. In case, the deduction of such excess amount is made
beyond the financial year concerned, such claim can be made
to the Assessing Officer (TDS) concerned. However, no claim
of refund can be made after two years from the end of
financial year in which tax was deductible at source.
 RECENT CASE LAWS

Formula One World Championship Ltd. v/s Commissioner of

Income-tax, (International Taxation) – Hon’ble Supreme
Court Judgement:
Section 9, read with section 195 of the Income-tax Act,
1961, read with article 5 of DTAA between India and UK -
Income deemed to accrue or arise in India (Permanent
establishment) - Assesse a UK based company entered into a
Race Promotion Contract (RPC) by which it granted to Jaypee
Sports, right to host, stage and promote Formula One (F-1)
Grand Prix of India event at motor racing circuit owned by
Jaypee - High Court by impugned order concluded that since,
assessee had full access to circuit and could dictate as to
who was authorized to access circuit and organising any other
event on circuit was not permitted, said circuit constituted
permanent establishment of assessee in India. Further, it has
been held that since as a part of its business, assessee as
well as its affiliates undertook all possible commercial rights,
including advertisement, media rights, etc. and even right to
sell paddock seats, such arrangement clearly demonstrated
that entire event was taken over and controlled by assessee
and its affiliates on one hand and Jaypee Sports on other.
Mere construction of track by Jaypee or its ownership or
organising other events was immaterial. The fixed place of
business in form of physical location, i.e. Buddh International
Circuit, was at disposal of assessee through which it
conducted business, taxable event had taken place in India
and non-resident assessee was liable to pay tax in India on
income it had earned in India through said track over which
it had complete control during period of race. Further also,
it has been held that question of PE had to be examined
keeping in mind duration of event, which was for limited days,
and for entire duration assessee had full access through its
personnel, hence, number of days for which access was there
would not make any difference. Thus, High Court rightly
concluded that based on exclusive nature of access and
period for which it was accessed it could be concluded that
circuit constituted a fixed place PE of assessee in India.